It’s Time for Financial Advisors to Change Their Minds to Understand Cryptocurrencies
An executive at Autonomous Research, an independent financial research organization, said that it is time for financial advisors to change their minds to understand cryptocurrencies. He said that when consulting with potential investors in the cryptocurrency, if the so-called advisor is still ignorant of this rapidly expanding financial innovation, it is irresponsible.
In an interview with CNBC, Lex Sokolin, director of global fintech strategy at Autonomous Research, claimed that many advisors have made a huge mistake in delimiting the cryptocurrency. He said:
“The cryptocurrency has caused some controversy, but it is already a constant fact. And the underlying blockchain is a very important technology for start-up companies.”
In the interview, he also said that since customers have investment requirements for cryptocurrencies, they must understand this innovation:
“So advisors can choose to say that this whole thing will fall apart and not get educated about it and not help investors, but that’s really irresponsible.”
His comments come in response to the likes of JPMorgan Chase’s Jamie Dimon famously dismissing Bitcoin as a ‘fraud,’ Berkshire Hathaway’s Warren Buffet and his sidekick Charlie Munger who called it ‘rat poison squared’ and ‘scum-ball activity’ respectively, and Vanguard CEO Tim Buckley arguing that ‘you will never see a fund from Vanguard on Bitcoin.’
For Sokolin such blanket dismissal is down right dangerous considering advisers are supposed to offer advice. He said:
The advisors really need to start understanding the working principle of the blockchain and understand why there are different cryptocurrencies.
He went on to say that for those who want to invest in cryptocurrency, they must first understand what they are about to participate in, which requires them to learn blockchain technology. For this purpose, they may need the assistance of a advisor. Of course, before they make a hasty decision on their own, the advisor must have an in-depth understanding of this issue.
Sokolin also said that the most interesting place in the crypto world lies in its underlying technology — blockchain. Although the price of cryptocurrencies fluctuates, it is wise to invest a small amount in it. However, he explicitly suggested that you do not want to make a desperate move on the cryptocurrency:
“It’s volatile right now, so you should not just go and fill your entire portfolio with cryptocurrencies… But it is a good way to add alternatives to your general allocation, something like 3 [percent] to 5 percent of your portfolio.”
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